(Bloomberg) -- The founder and chief executive officer of one of South Korea’s biggest K-pop management agencies resigned amid allegations that performers used illegal drugs while working with the company, YG Entertainment Inc.

Yang Hyun-suk, founder and largest shareholder of YG, stepped down from all executive positions, the company said Friday in a statement. Yang, 49, founded YG two decades ago, helping to expand the K-pop industry into a global phenomenon. Yang Min-suk, YG’s chief executive officer and brother of the founder, also quit on Friday.

The agency has been engulfed in a widening scandal following reports that Seungri, an artist formerly under YG management, is under police investigation for sex crimes and drug abuse at a nightclub in Seoul’s Gangnam district. Earlier this week, the agency terminated its contract with B.I of the boy-band iKon, after local media accused him of using illegal drugs.

Neither Yang brother has been accused of using drugs or sex crimes.

“I have patiently endured this situation in which shameful and humiliating words are being indiscreetly spoken as if they are is the truth,” Yang Hyun-suk said in the statement. “But I don’t think I can stand it any more.”

South Korea’s music and entertainment industry has been increasingly important for economic growth as one of the country’s best-known exports alongside Samsung phones and Hyundai automobiles. The scandal over YG artists alleged crimes has dragged the company’s shares down 38% this year. The stock dropped 5.6% on Friday, before the resignation announcement.

“I sincerely hope there will be no more damage to the artists of YG Entertainment,” Yang said in the statement.

To contact the reporters on this story: Sohee Kim in Seoul at skim847@bloomberg.net;Shinhye Kang in Seoul at skang24@bloomberg.net

To contact the editors responsible for this story: Peter Pae at ppae1@bloomberg.net, Dave McCombs

©2019 Bloomberg L.P.